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There are two ways that comes to my mind:
One, let us clear the banks' balance sheet slowly and slowly. Restrict the fresh lending to genuine customers with strict compliance requirements. This will improve health without losing to competition.
Else, all banks need to disclose their bad debts at a go and come clean totally on year start date. This is harsh and risky step to take. This will make that bank losing to others who do not come clean. Hence this needs a strict regulator to be present in the industry. By this, one time cleansing will happen for the Banks. Yes, this may require promoters, (government, if that is involved) to pump in fresh equity to the Banks.
